Telecom tariff hike: balancing industry sustainability with customer concerns in Nigeria
Joy Agwunobi
The recent approval of a 50 per cent tariff increase for telecom services in Nigeria by the Nigerian Communications Commission (NCC) has sparked widespread reactions, ranging from concerns among advocacy groups to questions from subscribers struggling with rising living costs.
While the NCC justifies the move as essential for sustaining the industry amidst increasing operational costs, the decision raises critical questions about its impact on consumers and the broader telecommunications ecosystem. This development mirrors a global trend where telecom operators are adjusting tariffs to fund infrastructure upgrades and meet the demand for high-speed services.
Globally, telecom companies are grappling with the dual pressures of increasing demand for high-speed data services and escalating costs of infrastructure development. Reports indicate that investments in 5G technology and spectrum auctions have pushed operators in countries like India, the United States, and South Africa to implement tariff increases. For instance, India’s leading telecom providers recently announced price hikes to offset their 5G deployment costs, while similar adjustments have been observed across Europe and Asia.
A report by PwC highlights that the telecommunications sector is facing substantial strategic challenges as it continues to provide essential services to billions of people and businesses globally.
The report projects that global data consumption will nearly triple, from 3.4 million petabytes in 2022 to 9.7 million petabytes by 2027, with video content accounting for 79 per cent of this growth. To meet these demands, the sector requires considerable investment in infrastructure, including the rollout of 5G networks. Telecom companies are also exploring new growth avenues, such as Internet of Things (IoT) solutions, private 5G networks, and digital infrastructure tailored for industries like healthcare and entertainment.
The report also notes that the increasing demand for high-speed data services necessitates substantial investments in infrastructure, such as the rollout of 5G networks. These capital-intensive projects often lead to tariff adjustments as a means of recouping investments. Additionally, the regulatory environment and spectrum auction prices in various countries can significantly influence the cost structures of telecom operators, further impacting tariff rates.
Despite these global trends, consumer advocates in Nigeria argue that the increase must come with tangible improvements in service quality. While the NCC has revealed the percentage increment to be implemented, the general perception in the industry is that Nigeria currently has one of the lowest telecom tariffs in Africa, especially for data.
Recent figures from the International Telecommunications Union (ITU) support this view, showing that Nigeria offers the most affordable 2GB data package compared to South Africa, Kenya, and Ghana. According to the ITU’s ICT Services Affordability Report 2023, the cost of 2GB of data in Nigeria is $2.35, whereas in Ghana, the same package costs $2.66. In Kenya, a 2GB data bundle is priced at $2.92, while in South Africa, the cost soars to $7.98. However, South Africa’s data price is not the highest in Africa; Zimbabwe leads with the steepest charges, paying $10.23 for 2GB of data.
Additionally, a global data pricing report by cable.co.uk highlighted Nigeria’s ranking as one of the most affordable countries for 1GB of data. Globally, Nigeria placed 31st out of 237 nations, with Israel taking the top spot at just $0.02 for 1GB. The average cost of 1GB in Nigeria stands at $0.39, the lowest in the West African region.
However, with the NCC approving new telecom tariffs, which are likely to raise data costs to levels similar to or even surpassing those of other African countries, it becomes crucial to assess the economic capacity of Nigerian subscribers.
A closer look at the GDP per capita of Nigeria compared to South Africa, Ghana, and Kenya reveals that Nigeria’s economic standing is the lowest among these countries.
In the case of South Africa, which currently has some of the highest data costs on the continent, the World Bank classifies it as an Upper-Middle-Income country. Its GDP per capita stands at $15,194.2 in 2023, significantly higher than Nigeria’s. Ghana, classified as a lower-middle-income country, also exceeds Nigeria’s GDP per capita, which is $7,543.0. While Kenya falls into the same lower-middle-income category as Nigeria, its GDP per capita of $6,307.2 still surpasses Nigeria’s, which stands at $6,207.4, according to the World Bank’s 2023 data.
However, for Nigerian subscribers, tariff hikes are likely to translate into higher bills, potentially limiting their ability to access digital services. This is especially concerning in regions where a large portion of the population depends on mobile networks as their primary means of internet access. The affordability of telecom services is critical in narrowing the digital divide, and significant increases in tariffs could impede ongoing efforts to promote digital inclusion.
Consumer groups and individuals are already expressing strong concerns about the consequences of these price hikes. Many fear that the increases will disproportionately burden low-income households and small businesses, already struggling with tight budgets.
Adeolu Ogunbanjo, the national president of the National Association of Telecom Subscribers (NATCOMS), has expressed strong opposition to the commission’s approval of a 50 per cent tariff increase for telecom services. According to Ogunbanjo, the increase is both excessive and unjustifiable, particularly in light of the prevailing economic challenges facing Nigerians.
Speaking on the matter, Ogunbanjo noted that 2023 was a particularly difficult year for many Nigerians due to several economic factors, including the removal of fuel subsidies, currency devaluation, and rising costs of electricity tariffs. These factors have driven up the cost of goods and services across the board, and an additional 50 per cent hike in telecom tariffs would further burden the already strained populace.
“It’s been 12 years since telecom operators last raised their prices, but this does not justify their demand for a 100 per cent increase, let alone the NCC’s approval of a 50 per cent hike,” Ogunbanjo said.
Ogunbanjo acknowledged that telecom operators face challenges. He noted that rather than focusing solely on price hikes, telecom operators should explore other avenues to generate revenue such as debts owed by banks and interconnect debts between operators, which run into billions of naira.
“The network operators owe each other; they should pay up among themselves. Let the banks assist by clearing off the debts with a 10% markup, which would help inject additional funds into the business,” he said.
Ogunbanjo also suggested that operators tap into the capital market to raise funds. “They can go to the capital market and launch Initial Public Offers (IPOs) on the stock exchange. Nigerians would be interested in purchasing shares in telecom companies,” Ogunbanjo explained, adding that this approach would not only generate capital but also foster greater public participation in the telecom sector.
Criticising the 50 per cent tariff increase, Ogunbanjo expressed strong disapproval, calling it an unacceptable option for both subscribers and the industry. “There are better solutions than taking the easy way out by increasing prices by 50 per cent. That’s a no-no,” he added.
Ogunbanjo cautioned that a significant tariff increase would negatively impact subscribers. According to him, communication services have become indispensable to daily life, and any drastic increase in costs would ripple through both direct and indirect services, worsening economic conditions for many.
“An increase in tariffs will inevitably affect subscribers and the broader economy. For instance, the POS operator on your street will raise charges, and everything else will follow suit. The impact on the average Nigerian, who is already impoverished, would be severe,” Ogunbanjo explained.
He further noted that Nigerians typically spend around three minutes per call on average, but some users talk for much longer—sometimes up to hours. Adjusting tariffs by a modest 10 per cent, he argued, would still allow telecom operators to make profits without overburdening subscribers. “A 10 per cent increase is sufficient. Telecom operators will recover their costs and make gains, but pushing for more than that would be akin to milking consumers dry,” he said.
Ogunbanjo emphasised that a collaborative approach is necessary to resolve the issue. NATCOMS has engaged with the NCC, urging them to reconsider the tariff hike and reduce it to a more reasonable 10 per cent. He warned that if the NCC fails to act, the association might explore legal action to protect the interests of Nigerian subscribers.
“We have made our position clear to the NCC, and we hope they will listen to the voice of reason and adjust the increase to 10 per cent. If this doesn’t happen, we may have no choice but to seek redress through the courts,” he said.
Ogunbanjo reiterated the need for fairness and consideration for the average Nigerian subscriber. He urged the NCC and telecom operators to prioritise affordability and accessibility in their pricing decisions, emphasising the critical role of telecommunications in modern life.
“We understand the operators’ concerns about operational costs, but the solution cannot be to stifle subscribers with exorbitant tariffs. A balanced approach that considers the economic realities of Nigerians is what we need,” he added.
Similarly, Joseph Ajaero, president of the Nigerian Labour Congress (NLC), has criticised the government for siding with telecom companies while ignoring the struggles of ordinary Nigerians. Speaking during a recent television interview, Ajaero accused the government of failing to fulfill its regulatory responsibilities, allowing private telecom operators to operate unchecked.
“These companies are profiting massively, while the average Nigerian sinks deeper into poverty. We even hear government officials speaking as though these telecom companies are government-owned enterprises. That’s the issue we’re facing now,” he said.
Ajaero expressed concern over the disproportionate impact the 50 per cent tariff hike would have on low-income earners, many of whom already struggle to make ends meet.
“Government officials argue that higher tariffs are beneficial, but all this does is push more Nigerians further below the poverty line. Where is the balance between corporate profits and public welfare?. For someone earning N70,000, spending over N10,000 on these tariffs is unsustainable. How will they afford transportation, housing, and other essential needs?”
Ajaero also criticised the government’s reliance on imported telecom and power equipment, highlighting the need to support local manufacturing to reduce costs. He argued that items like cables and meters could be produced domestically, reducing dependence on imports and easing the financial burden on consumers.
“Why are we importing equipment that can be produced locally? This reliance on imports only inflates costs, and the government passes these expenses onto the public,” Ajaero stated. “Even for something like metering, we are importing cables instead of supporting local industries.”
He rejected claims that the tariff increase is justified by inflation and operational costs, accusing officials of using these reasons as an excuse to boost government revenue without addressing the broader implications for Nigerians.
“We need to rethink these policies. Ordinary Nigerians should not have to bear the brunt of these increases while corporations thrive. The government must strike a balance between supporting businesses and ensuring citizens can afford basic services,” Ajaero said.
In their defense, the Federal Government justified the recent 50 per cent increase in telecommunications tariffs, citing global inflation and rising operational expenses as the primary drivers of the hike.
Bosun Tijani, the minister of communication, innovation, and digital economy, made this disclosure while appearing before the joint National Assembly committees on communication to defend his ministry’s proposed N12 billion budget for 2025.
Tijani explained that the tariff adjustment reflects broader economic trends and the rising costs associated with importing goods. According to him, tariffs often act as a form of sales tax, resulting in a one-time price increase rather than sustained inflation.
“Historically, tariffs have caused a one-off price increase, which aligns with global economic patterns,” Tijani said.
He further stated that the Federal Government plans to invest N6 billion in deploying 90 kilometres of fibre optic cable to expand the country’s current capacity from 35,000 kilometres to 125,000 kilometres.
During the budget defence session, Tijani emphasised that fibre optic deployment is part of a broader strategy to stimulate growth in critical communication sectors. He noted that this initiative would play a pivotal role in enhancing Nigeria’s digital infrastructure, improving connectivity, and fostering innovation across the country.